Council Divided Over How To Use Health Benefit Savings
OCEAN CITY – The Mayor and Council heard “good news” this week when it learned the city’s health benefit costs will be $100,000 less than projected.
“We are bringing good news to the table today,” Ocean City Human Resources Director Wayne Evans said.
Evans explained that the medical, prescription drug and vision plan rates are projected at a better rate than expected. The city had budgeted for a 10-percent increase in rates when there was an actual 3.9 percent increase for plan year 2013 due to positive plan trends over the past 30 months. The lower increase has resulted in a $100,000 savings in the projected annual incremental cost of $256,000.
Evans furthered that dental, accidental death and dismemberment, and long-term disability renewal rates are unchanged from 2012, and Bolton Partners’ Kay Moran is currently in the market for the life insurance benefit and legislated plan changes will be brought to the council once reviewed.
Evans gave the council a brief history of the town’s medical benefit changes, starting in July of 2007 when Medicare Supplement plan for over age 65 retirees was added. In July of 2008, an increase in copay for a physician office visit was approved from $15 to $20 and changed prescription copay from $10 generic and $20 preferred brand to $0 generic, $25 preferred brand and $45 non-preferred brand. In July of 2009, the town changed the out-of-pocket maximum for out-of-network providers from $1,200 to $2,500 per person with intentions to have more employees use the network.
In April of 2010, the medical plan was put out to bid and Carefirst was the successful bidder. In August of 2010, an open access HMO was added as an option to the PPO that has a lower cost to the town and its participants. In January of 2012, a high deductible health plan with a $1,200 deductible for single coverage and $2,400 deductible for family coverage was added with a Health Savings Account (HSA).
“There haven’t been too many people that have taken advantage of that but it has worked very well,” Evans said of the HSA option.
City Manager David Recor recommended that the council earmark the $100,000 savings and use it to offset the anticipated budget cap in the next fiscal year.
“We are going to begin the next budget process by identifying our projected revenues and our anticipated expenditures and part of the anticipated expenditures are going to be our needs, which will be a variety of needs, such as infrastructure and personnel, so you are going to decide based on those priorities where the money will be spent,” Recor said. “Today I can’t tell where the money should be. I am simply saying we should save the money. If you need a specific answer, I think the money should be spent on infrastructure. Clearly, we have infrastructure needs in the community that need to be met.”
Council President Jim Hall disagreed, saying the savings should be set in an individual medical fund so that when rates do increase the money is there to cover it.
Finance Administrator Martha Bennett explained that an individual fund cannot be set up that way but the council could assign the savings in the fund balance.
Councilman Joe Hall’s opinion was that the taxpayers funded the health benefit in the first place and that the savings should be returned to the general fund.
“It turns out that the service can be provided for less so now you have $100,000 that was earmarked for certain services that you didn’t need that $100,000 for. So the right thing to do is return that money back to the general fund, build the fund balance back up, and when the new council decides the needs as brought forward by the city manager and staff the council at that time would earmark it,” he said.
Councilwoman Margaret Pillas set a motion to send the savings to the restricted reserve fund balance for future medical expenses, and the council voted 4-3 to approve with Councilmen Joe Hall, Doug Cymek and Lloyd Martin in opposition.
Moran than presented that due to the health care reform there are legislative changes required for the HSA of a $50 increase in individual coverage and a $100 increase in family coverage.
Moran’s recommended the council renew with CareFirst for the Medical/Prescription Drug and Vision plans, increase town contribution to the HSA by the increase in the deductible of a $1,250 annual increase based on current participation, renew with Assurant for the dental and longterm disability, and renew or move life, dependent life and AD&D to lowest bidder, and the council voted unanimously to approve the request.
Joe Hall took the opportunity to point out that the changes in town employee benefits the majority of the current council initiated a couple of years ago turned out ok in the end.
“It shows the risk we took in discussing the changes needed to put us on a good path are working even though change creates anxiety … this shows that risk can be good sometimes,” he said.
Knight pointed out that the changes began long before the actions made by this council in the last couple of years when the option of a HSA was put in place.“It is really good that we have always had our eye on the ball,” she said.